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tv   Nightly Business Report  PBS  March 17, 2016 7:00pm-7:31pm PDT

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this is "nightly business report." with tyler mathisen and sue herera. green for the year. on this st. patrick's day the dow goes positive for 2016, erasing all of the turmoil of january and february. tackling entitlements. what the speaker of the house wants to do with social programs you want to touch. fill her up. grab a taco or go for a swim. an entrepreneur's journey to prove everything is bigger in texas. all that and more tonight on "nightly business report" for thursday, march good evening and happy st. patrick's day. a stunning turnaround. the blue chip dow index is positive for 2016, who'd have thunk it. it erased losses from the mark's worst start to a year ever and reversed a remarkable
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2,000-point drop from the recent low. today's climb was helped by a rise in oil prices and continued enthusiasm. following yesterday's fed decision to alter its interest rate hike forecast. the dow jones industrial average gained 155 points to 17,481. nasdaq added 11. the s&p 500 briefly positive for the year too climbed 13. so while there are a number of things working in the market's favor there are also a host of things that aren't. >> it was another up day, this time on the weak dollar. yet a lot of skepticism. what's the problem? here's the good news. what some are calling the goldilocks market. first there's no recession in sight. second, interest rates are low. third, inflation's up a little bit but not significantly. and most importantly, the jobs market is in good shape. given that, why does the market continue to have such a tentative feel to it? and why did janet yellen seem to reflect that tentative feel?
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it seems to go beyond the somewhat boiler plate statement that global economic and financial developments continue to pose risks. the short answer is that there is far more pain, anxiety, and danger in the u.s. economy than the statistics suggest. growth is slow. wages are stagnant. and it's a lot of sort of disappeared workers in the economy who don't look for jobs or don't even qualify for jobless benefits anymore. and that's why we have donald trump and bernie sanders. and this is why we have a very cautious fed. they are not just looking at jobs and inflation, which is theoretically their sole man date. the fomc is looking at the overall state of the economy and the fact that trump and sanders have gone so far this year on the dissatisfied vote is not lost on yellen and company. let's turn to two market pros to discuss what they think is working in the market and what is not. joining us is david kelly, chief
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global strategist with sp morgan funds, and jack avalon, bml private bank. ja jack, you err on the side of things are not as good as people think they are in this market. >> yeah, if you look at some of the metrics we look at, yeah, i think the economy is doing okay. and jobs are certainly being created. but if you really look at valuation, if you just try and tie it back to profits, there really isn't a very strong connection. in fact, part of the reason why we have such trouble in january was because we were going through fourth quarter earnings results. my sense is, as we start moving into april, we're going to have the same problem once we look at first quarter numbers. the other thing is liquidity. i mean, that's drying up as well. >> david kelly, address jack's concerns here, particularly the one having to do with profits. my guess would be that maybe the market is looking six to ten months ahead and saying, by the
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time we get into the summer and fall, profits may be improving. >> well, what happened in the first quarter is we had a panic attack. it wasn't a heart attack, it was a panic attack. people got unreasonably scared. >> what was going on in china, a lot of people started talking about recession. bob was talking about pain and anxiety and danger. i don't agree with the pain or danger but there is anxiety. the media latched onto this idea of recession. even though there's no basis for it whatsoever. and then we saw also the political candidates talk about america being in decline. we've got -- of course janet yell.herself, in order to justify this extreme policy, the fed was talking down the economy. all this i think is adding to anxiety. but the economy itself? it's a slow-going economy, that's all we've got. but the profit decline i do think is temporary. it's about the dollar, it's about oil. they reversed. i think you'll see a big reversal in profits by the end of this year. >> jack, so do you think that we are going to see a fairly decent
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market year given the recovery that we've seen, even if there is some pain out there? >> well, i think we have maintained our defensive position -- >> david, let me pick up with you as we try to restore our signal with jack. as we move into this first quarter profit reporting seen which will happen about three weeks from now what do you expect to see? is it likely to be unsetting or encouraging? >> no, i think it should be basically encouraging. the key thing is to separate out the dollar effect, which still -- the dollar will still be up year over year and that's hurting, particularly the oil effect. i think people get used to looking past those. i think things will look better. and also, we'll get an employment report which should look pretty good. so long as things are calm in china i think we can build on the recent momentum. >> where does that put the fed at this point, david? they didn't move this time. and they slashed the number of
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times that they are paekting to be able to raise rates this year. >> yeah, i honestly think think keep on getting this wrong. i don't think these low rates are stimulating the economy. the economy is doing okay but not because of what the fed's doing. the problem is they push out the day they're going to raise rates. someday we'll have a recession, someday we'll need them to cut rates. but if they never raise rates they'll never be able to cut them. i think they're making a grave mistake keeping rates this low this long. they should have raised it last summer, they got scared out of doing it then, they got scared out of doing it now. i think they're way too easy and absolutely this is going to end badly. i don't think it's going to end badly this year. >> david kelly with jp morgan funds, and jack, we apologize for the technical glitch. some positive news today. if you're looking for a job, the number of job openings rose to more than 5.5 million in january. the labor department also reports that actual hiring to the lowest level since late
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2014. a separate report showed that initial claims for state unemployment benefits rose from a five-month low by 7,000 last week. despite the rise the level is still consistent with a strengthening labor market. the current account deficit which measures the flow of goods, services and investments in and out of the country narrowed in the fourth quarter. but for all of last year the deficit jumped to its highest level in seven years. weakness in major overseas economies and the stronger dollar have reduced our export sales. investors are always on the hunt for yield, even in an up market. the most popular place to find that income is with dividends. but as mikef santoli tell uz us dividends have always been an important driver of investors' long-term stock returns. with interest rates low dividends have become even more crucial for income-oriented investors. the central banks around the
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world having bought trillions in bonds to help suppress interest rates. many investors feel forced to use blue chip stocks to earn reliable income. such companies seem happy to my knowledge. the total dollar value is up 95% since 2009. this helps explain why such steady dividend players such as coca-cola and kellogg have hit new highs lately. while demand might be helping support the market in this environment investors should be aware that stocks are not good outright substitutes for ponds. they can swing dramatically in value and won't stabilize a portfolio the way bonds can. and many dividend-rich sectors of the market already appear richly valued such as utilities, telecom, and consumer staples. this may restrain these stocks' long-term appreciation potential. to be tolerant of possible down turns along the way. for "nightly business report," i'm mike santoli.
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while the stock market is climbing, there's one stock that is not participating. valiant. earlier this week the company slashed its revenue forecast and delayed its 10k filing. the ankling of the stock began months ago on accusation busy a short seller and scrutiny from washington over drug price increases. this year alone shares are now about 70%. valiant's creditors are starting to get antsy. >> reporter: the uncertainty continues for valiant pharmaceuticals. the biggest immediate concern, the company's more than $30 billion of debt. because the embattled drugmaker hasn't filed its annual report for 2015 it risks triggering defaults with bondholders. the company says it will negotiate with creditors to extend the deadlines though some fear the terms may become onerous. bmo capital market estimates the company has about $6 billion of assets it could potentially divest, ranging from neurology
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business to prescription eye drugs and dentistry unit. the company has said paying down debt is a key priority for the year. finally investors are wondering where growth will come from for valiant. the company this week outlined six of its leading drivers but some doubt their prospects. the first is a bowel drug valiant acquired in its $11 billion purchase of salex last year. the problem, a patent challenge. though analysts expect the drug is protected from competition into the 2020s some see reason for caution raising red flags around the defense ability of some of the drug's patents. another growth driver valiant highlights, experimental psoriasis drug. though there's a need this one has rug into problems in the past. an and gen discontinued a partnership because it was associated with suicidal thoughts. nonetheless some analysts say with proper drug safety levels the drug may find a place on the market are the best thing shareholders may be able to hope
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for in the near term is stability. for "nightly business report," i'm meg terrell. seaworld's decision to maze out its most famous attraction. seaworld is getting a makeover. under pressure from critics, the theme park operator is getting rid of its killer while shows. the one thing it's best known for. the company's new direction was cheered by investors who sent the shares higher. morgan brennan has more on seaworld's big changes. >> seaworld is phasing out its most famous attraction, killer whales.
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bowing to years of public pressure the theme park operator will stop breeding they will immediately, meaning its 24 existing orcas across three marine parks will be the last generation in company captivity. that's not all. seaworld announcing it will end theatrical shows involving the whales at all of its locations from california to texas to florida. replacing them with new orca encounter exhibits that will begin rolling out next year. it's a huge shift for a company that became a top tourist draw in the 1970s thanks to its shamu shows. times have changed and today's move is in response to backlash in the wake of "blackfish," a 2013 documentary critical of seaworld's treatment of orcas leading to battles with animal rights activists and state regulators in california where the uproar has been most pronounced. that's resulted in falling earnings, waning attendance, and ballooning costs as the company has tried to resuscitate its brand. the results, a stock punch of nearly $40 a share to $18 today. in a "los angeles times" op ed,
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the ceo writing, we are proud to contribute to the evolving understanding of one of the world's largest marine animals. part of that is a new educational partnership with a previous critic, the humane society. shares of seaworld jump on the news today and analysts applauded the changes. key bank's scott herman believes it will have a positive impact on the public's per, "a step in the right direction" in terms stabilizing current trends and setting the company up for lo longer-term growth. caterpillar lowering its first quarter guidance. that is where we begin "market focus." the world's largest mining and construction equipmentmaker sees its quarterly earnings up to one-third lower than wall street expected. the company taking down its revenue target. yet it maintained its full-year forecast. despite the weekend guidance shares ended the day up a little more than 2% to 75.90. the retailer land's end saw a
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loss in its fourth quarter due to declining sales among other things. while the company saw its profits fall sharply its revenue decline was less than analysts expected. the overall results were enough to keep investors happy with shares up on this positive day well over 3% to 25.15. profit at the arts and crafts supplier michael's grew 17% in the fourth quarter of last year. despite the strong results the company warned investors it faces challenges this year such as unfavorable exchange rates. the stock getting a sizable lift on the results up more than 12% to 27.44. drug distributor mckessan announcing layoffs as it looks to cut costs, laying off about 1,600 jobs in the u.s. that's about 4% of its work force. shares fell more than 2.5% to 151.69. adobe saw record revenue thanks to strong growth in its cloud
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products. adobe raised its full year guidance based off those strong results. shares of adobe initially rose following the after the bell news to 89.96. earlier this week we told you about a possible deal in the energy sector and now transcanada announced after the bell that it is buying columbia pipeline group for $25.50 a share in a deal valued at about $13 billion. shares of transcanada down initially in after hours trading. shares of columbia pipeline sparked initially in the after hours. social security, medicare, reforming these entitlement programs is a big issue on the campaign trail. republican front-runner donald trump has said he won't touch them. that's not what house speaker paul ryan thinks should be done. john harwood spoke to mr. ryan exclusive if we do not prevent medicare from going bankrupt, it will go bankrupt, and that will be bad for everybody. we have to tackle our debt
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crisis. we have to tackle the drivers of our upcoming debt. i think -- i hope that whoever our standard bearer is going to be will acknowledge that. >> if presidential leadership is the indispensable ingredient for title reform, as everybody has said and has for a long time, doesn't it mean if you nominate and elect a candidate who says, don't touch them, it's n going to happen? >> i'd like to think that he will see what is going on with these programs. he says don't touch anybody -- >> i disagree. for younger people like myself, they're not going to be there for my generation when we retire. you have to change these benefits to prevent them from going bankrupt. >> donald trump is running against candidates in the republican primary who agree with you on entitlement reform and beating them. >> well, i think that's lots of reasons. do we have a debt crisis coming in america? we, we do. should we do something to prevent that from happening? yes, we should. >> on taxes, your predecessor ways and means chair dave camp came out with comprehensive texas reform, he adopted as a
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principle that it was going to be distributionally neutral. it wasn't going to advantage any group over the current system. is that still a principle that you think is appropriate? >> so i do not like the idea of buying into these distributional tables. what you're talking about is what we call static distribution. it's a ridiculous notion. what it premiums is, life in the economy is some fixed pie. and it's not going to change. and it's up to government to redistribute it more equitably. that is not how the world works. >> you're not worried -- >> expand the economy and what we want to maximize is economic growth, in upper mobility so everybody can get a bigger slice of the pie. >> you're not worried about blue collar republican voters who are voting in the primaries right now xwrg to say, wait a minute, you're taking care of people at the top more than you're taking carry of me? >> yost people don't think john's success comes at my success or my success comes at your expense.
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people don't think like that. bernie sanders talks did about that stuff. that's not who we are. >> john harwood joins us now. great interview, first. can the republicans really bridge that gap that you mentioned between paul ryan and donald trump? >> well, in some areas they can. donald trump's tax plan is like many other republican tax plans, only bigger. so i'd expect that paul ryan and donald trump could do some business on taxes. much harder on issues like trade. although when i talk to ryan he said, well, republican voters, they're not against trade deals, donald trump's not against trade deals, they're against bad trade deals. we have one on the table, the transpacific partnership, which paul ryan is for. that is a difficult gap to bridge. donald trump says the transpacific partnership is the worst deal ever negotiated. >> so what about bridging the gap between mr. ryan, the republican congress, and hillary clinton if she is the eventual winner in november? can they do that, can they do business? >> well, tyler, that's what's
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interesting. you know what paul ryan told me was we need a clarifying election in this country in order to solve our big problems. and i said, what if a democrat wins that? he says, it's going to be more of the same like we've had over the last several years. we're not going to make progress on our problems. so if that happens, if republicans hold the house and a democrat wins the white house, it is not going to be a pretty picture in terms of compromise unless somebody changes course in a significant way. >> you have the best beat in the world. especially this year, john. thanks so much. >> thank you. >> john harwood in washington. and coming up, it is giant. it is odd. it is very lucrative. meet the entrepreneur who turned a truck stop into a whole lot more.
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most every car in the u.s. will have automatic emergency brakingpy the year 2022. yesterday we told you the deal was close to being announced and today 20 automakers made it official already the safety feature will be standard on most new cars in just a few years. nike goes back to the future with self-tying sneakers. the shoes have power-operated laces. as soon as you put your foot in, press a button and they tighten up. whoa. >> i think there's a wide range of people that are really interested in this whole self-lacing adaptive performance. obviously you have the sneakerheads who are all over it. this has been a buzz for them for years. there was a write-in petition to nike to power through and get the power laces in a product. so it's great to be able to put a product out there that is a step toward the future of
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adaptive performance. >> nike plans to sell them later this year in the increasingly tech-driven athletic market. as they say, if you build it, they will come. and that's exactly what happened to one entrepreneur who opened a gas station in dallas. but not just any old gas station. jane wells has the story. >> reporter: fuel city is a gas station with cheap gas and easy freeway access in the middle of downtown dallas. last year sales reached $25 million. what? how? >> we'll have eight or ten people here at night making tacos. karaoke is in front palm tree on the weekends are. we got a swimming pool which is fun. we have a dinosaur. >> reporter: you might call it a truck stop but the owner won't. >> it's someplace where dreams come true, fuel city. >> reporter: this is our strangest success yet. >> i love to work. i worked in department stores, was a lifeguard, was a
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substitute teacher. interviewed to be bozo the clown in south texas when i was going to college. >> reporter: this cereal entrepreneur started fuel city in his late 40s. >> i was doing jury duty down the street. during the lunch break i found this spot. >> reporter: this spot is eight acres where in 1999 he hoped to recreate his childhood ranch. >> i wanted to enjoy a ranch but in the city, let people see what dallas looked like before it was a city. in '99 it was real hard to sell to it a bank. because when i showed them the swimming pool they said, a swimming pool at a convenience store? i said, no, it will be cool, people will want to come. the store cost $4.5 million. i borrowed $3.5 million. i put up $1 million to buy the land and finance this action put a second motor xwanl on my house. it was such a phenomenon when i opened up i thought, nobody's going to come. >> how many taco dozen you sell a day? >> a lot. i had a graph on the wall and i
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would graph my bank balance every day. if i was going up i was making it. if i was going down i wasn't going to make it. >> reporter: 17 years later he's expanded to two fuel cities which did $39 million in sales last year. 80% from fuel. two more are planned even as he keeps testing what you might call city limits. >> we've had white buffalo, got a ticket from the city because they said you can't have buffalo in downtown dallas. zebras and camels. and got in trouble for that. had to take them out. i'm thinking about putting in kangaroos. i think in the next five years i'll have a couple of giraffes. wouldn't that be cool? >> reporter: the rest of the 65-year-old's bucket list isn't nearly so strange. >> i have goals in increasing my net worth, probably my number one thing. >> to? >> $70 million by 70. >> how much are you making? >> how much am i making? a lot. >> reporter: for "nightly business report," i'm jane wells. >> stories you will only see here on "nightly business report." >> a six-pack and a giraffe?
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>> and a swimming pool. >> and fill her up, whoa. let's take a look at the rally on wall street. the dow jones industrial average gained 155 points positive for the year now. at 17,481. nasdaq added 11. and the s&p 500 nipped into positive territory, couldn't quite hold it, finished higher by 1337. >> you might have trouble with the kangaroos. that does it for "nightly business report." thanks for watching. this is the time of year your public television stations seek your support. >> thank you from me as well. i'm tyler mathisen. have a great evening, everybody. see you tomorrow.
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kacyra: it kind of was, like, the bang that set off the night. rogers: that is the funkiest restaurant. thomas: the honey-walnut prawns will make your insides smile. [ laughter ] klugman: more tortillas, please! khazar: what is comfort food if it isn't gluten and grease? braff: i love crème brûlée. sobel: the octopus should have been, like, quadripus, because it was really small. sbrocco: and you know that when you split something, all the calories evaporate, and then there's none. whalen: that's right.

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